1) (a) What proportion of total financing comes from non-owners for fiscal 2013? For fiscal 2012? (b) Explain why the financing side of Starbucks balance changed from fiscal 2012 to fiscal 2013.

2) Using the common-size information you computed in the common-size statement of earnings (a) Identify Starbucks major expenses and list them below. (b) Explain how you identified the major expenses. (c) Explain any changes in cost structure that you observe from fiscal 2012 to fiscal 2013.

3) Regarding Starbucks large litigation charge in fiscal 2013, (a) explain why Starbucks included this as part of operating income. (b) why do you think Starbucks reported the charge as a separate line item rather than include it in total general and administrative expenses?

4) Was Starbucks profitable in fiscal 2013? In fiscal 2012? Explain your definition of profitable.

KS.... X 3 / 18 # 52.2% je Item 8. Financial Statements and Supplementary Data STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share data) Sep 39 Sep 30, Ort2. 2011 $ Fiscal Year Ended Net revenues Company operated shoes Licensed stores CPG, foodservice and other Total met revenues Cost of sales including accupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Litigation charge Total operating expenses Gem on sale of properties Income from equity investees Operating income (los) Interest income and other net 11.793 2 5 1,360.5 1,7385 14.8922 6,3823 4,2861 4572 10,534.5 $ 1.2103 1,554.7 13,2995 5,8133 3.918.1 429 9 5503 801.2 9.6324 1,0075 1,0605 11,7004 4.9155 3.594.9 392.8 5233 7493 6214 9379 2,784.1 15.4690 11.5128 251.4 (3254) 1236 (28.1) 10.1758 302 123,7 1.7285 115.9 (333) 1.8111 5631 1.248.0 (199) Ering(loss) before income taxes lacome taxes Net earnings including moncontrolling interests Netcomings attributable to controlling interests Net earnings attributable to Starbucks Earnings per share-basic Earnings per share-diluted Weighted average shares outstanding Base Diluted Cashdvidends declared per share 210.7 1.997.4 94.4 (32.7) 2.059.1 674.4 1,384.7 09 1,3838 $ 1835 1.79 $ (238.7) 8.8 0.5 835 0.01$ 0.01$ 1.245.7 1.66 162 $ 7493 762.3 0.89 $ 7544 773.0 0.72 $ 7483 7697 0.56 $ See Notes to Consolidated Financial Statements Serdar STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Sep 29, Sep 30, 2012 1,384.7 $ Oct. 2011 1,248 0 8.8 $ (0.6) 02 47.1 (246) 0.7 (03) (422) 43 0.7 (03) (122) 4,5 Net earnings including noncontrolling interests Other comprehensive income (loss), net of tax Unrealized holding gains (losses) on available for sale securities Tax (expense) benefit Unrealized holding main(losses) on cash flow hedging instruments Tax (expense) benefit Unrealized holding gains (losses) on net investment hedging instruments Tax (expense) benefit Reclassification adjustment for met (grans losses realized in net earnings for cash flow hedges Tax expense benefit Net realized holding gains (losses) Translation adjustment Tax (expense) benefit Other comprehensive income (los) Comprehensive income (los) including noncontrolling interests Comprehensive income attributable to socontrolling interests Comprehensive income attributable to Starbucks 328 (12.1) 1.0 (0.4) (12.1) 4.5 14.8 (43) 463 (3.5) 85.6 (41.6) 03 (26.4) 16.6 (6.1) (4.4) (1.4) 09 (109) 1.2371 23 1.234.8 6.1 (33) (236) 1,3611 0.9 1,360 2 $ 443 531 5 05 526 $ See Notes to Consolidated Financial Statements STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except per share data) Sep 29, Sep 30, 2012 $ 2,575.7 $ 6581 5614 1.111.2 287.7 2773 5,4714 583 496.5 3,200.5 9670 1853 274.8 862.9 11,516.7 5 1.1886 848.4 485.9 1,2415 1965 238.7 4.199.6 1160 4599 2.6589 973 144.7 143.7 399.1 8,2192 ASSETS Current assets Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes, net Total current assets Long-term investments Equity and cost investments Property, plant and equipment, net Deferred income taxes, net Other assets Other intangible assets Goodwill TOTAL ASSETS LIABILITIES AND EQUITY Current liabilities: Accounts payable Accrued litigation charge Accrued liabilities Insurance reserves Deferred reveme Total current liabilities Long-term debt Other long term liabilities Total liabilities Shareholders' equity Common stock (50 001 par value) authorized, 1.200.0 shares; issued and outstanding. 753 2 shares and 749 3 shares (includes 3.4 common stock units). respectively Additional paid capital Retained earnings Accumulated other comprehensive income Total shareholders' equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY 398.1 491.7 $ 2.7841 1.2693 1785 653.7 5.3773 1.299.4 357.7 7,034.4 1.1338 167.7 510.2 2.2098 5496 3453 3.101.7 0.8 2821 4,1303 670 4,4802 2.1 4,4823 11 5167 $ 0.7 394 5,046.2 22.7 5 1090 55 5.114.5 8,2192 See Notes to Consolidated Financial Statements STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS for million) Sep 29, Sep 30, Oct 2 Focal Year Ended 2013 2012 2011 OPERATING ACTIVITIES 8.8 $ Net earnings including noncontrolling interests 1,384.7 $ 1.2480 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 6556 580.6 550.0 Litigation charge 2,784.1 Gain on sale of properties (302) Deferred income taxes, et (1.045.9) 61.1 1062 Income cared from equity method investees, net of distributions (562) (193) (329) Gain resulting from sale/acquisition of equity in joint ventures (80.1) (55.2) Stock-based compensation 1423 1536 145.2 Other 230 23.6 33.3 Cash provided (used) by changes in operating assets and liabilities: Accounts receivable (683) (903) (887) Inventones 152.5 (2733) (4223) Accounts payable 88.7 (1052) 2275 Accrued liabilities and insurance reserves 87.6 23.7 (81.8) Deferred revenue 139.9 60.8 35.8 Prepaid expenses, other current assets and other assets 763 (19.7) (22.5) Net cash provided by operating activities 2.9083 1,750.3 1.612.4 INVESTING ACTIVITIES: Purchase of investments (785.9) (1.748.6) (9660) Sales, maturities and calls of investments 1,0402 1,796.4 4300 Acquisitions, net of cash acquired (610.4) (129.1) (558) Additions to property, plant and equipment (1.1512) (856 2) (531.9) Proceeds from the sale of property, plant, and equipment 153 53 117.4 Proceeds from sale of equity in joint ventures 108.0 Other (272) (418) (132) Net cash used by investing activities (1.411.2) (974.0) (1.019.5) FINANCING ACTIVITIES: Proceeds from issuance of long term debt 749.7 Principal payments on long-term debt (352) (Payments) proceeds from short-term borrowings (30.8) 30.8 Purchase of no controlling interest (27.5) Proceeds from issuance of common stock 247.2 2366 250.4 Excess tax benefit on share based awards 258.1 1698 1039 Cash dividends paid (628.9) (5130) (3895) Repurchase of common stock (588.1) (519.1) (5559) Minimum tax withholdings on share-based awards (121.4) (585) (15.0) Other 10.4 (0.5) (5.2) Net cash used by financing activities (108.2) (745 5) (608.0) Effect of exchange rate changes on cash and cash equivalents (1.8) 9.7 (0.8) Net increase (decrease) in cash and cash equivalents 1,387.1 40.5 (159) CASH AND CASH EQUIVALENTS: Beginning of period 1.1886 1.148.1 1.164.0 End of period $2.575.7 $ 1.1886 $ 1.148.1 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for Interest, net of capitalized interest $ 34.4 $ 34.4 $ 344 Income taxes S 539.1 S 4169 S 350.1 See Notes to Consolidated Financial Statements 2013 Form 10-K CONSOLIDATED STATEMENTS OF EQUITY (in millions) Additional Pald in Capital 0.75 145.65 Share 742.65 Equity Accumulated Other Retained Comprehensive Shareholders No controlling Earning Income (Less) Interest 3,471.2 $ 57.25 3,674.7 S 76 5 1,245.7 1,245.7 23 (109) 1472 Total 3,682.3 1,248.0 (10.9) 1472 (109) 1472 Balans, October 2010 Nel camings Other comprehensive income foss) Stock-based compensation expense Exercise of stock options, including tax benefit of 5961 Sale of common stock, including to benefit of $0.1 Repurchase of common seck Cash divides declared Purchase of controlling interests Balanes, October 2, 2011 17.3 0.5 (15.6) 312.5 19.1 (555.9) (419.5) (28.0) 40 55 744.85 312.5 19.1 (555.9) (4195) (28.0) 43849 $ 1,383.8 (23.6) 155.2 811 III III III Ilali 312.5 19.1 (555.9) (419.5) (35.5) 4.387.3 1,384.7 (23.6) 155.2 46.3 $ (7.5) 2.4 $ 0.9 4,297.4 5 1,383.8 (23.6) 155.2 Other comprehensive income dow) Stad-based compensation pense Exercise of sted options, including to benefit of 51673 Sale of common sted, Including to benefit of 0.2 Repurchase of common sock Cash dividende deland Nocontrolling resulting from equisition Malam September 30, 2012 Netamin Other completo) 16.5 03 (123) 326.1 19.5 (501.9) 111 Tals! TII (913) (543.7) 326.1 195 (5932) (543.7) 749.3 326.1 19.5 (593.2) (543.7) 2.2 5,114,5 8.8 443 394 $ 5,046.25 22.7 5,1090 5 83 55 5 0.5 Brace of mindig a benefit of 144.1 Salem, Induling benefit of 902 144.1 144 0.3 0.1 166.7 144.1 (108) (2885) (255.6) Necrolling from die Hal September 29, 2013 366.8 204 (544.1) (668.6) 753.25 OR 282.15 4,1103 See Notes to Consolidated Financial Statements. 366.8 204 (544.1) (6686) (3.9) 4,4823 67.0 $ 4448025 0.9) 2.1 $ KS.... X 3 / 18 # 52.2% je Item 8. Financial Statements and Supplementary Data STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share data) Sep 39 Sep 30, Ort2. 2011 $ Fiscal Year Ended Net revenues Company operated shoes Licensed stores CPG, foodservice and other Total met revenues Cost of sales including accupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Litigation charge Total operating expenses Gem on sale of properties Income from equity investees Operating income (los) Interest income and other net 11.793 2 5 1,360.5 1,7385 14.8922 6,3823 4,2861 4572 10,534.5 $ 1.2103 1,554.7 13,2995 5,8133 3.918.1 429 9 5503 801.2 9.6324 1,0075 1,0605 11,7004 4.9155 3.594.9 392.8 5233 7493 6214 9379 2,784.1 15.4690 11.5128 251.4 (3254) 1236 (28.1) 10.1758 302 123,7 1.7285 115.9 (333) 1.8111 5631 1.248.0 (199) Ering(loss) before income taxes lacome taxes Net earnings including moncontrolling interests Netcomings attributable to controlling interests Net earnings attributable to Starbucks Earnings per share-basic Earnings per share-diluted Weighted average shares outstanding Base Diluted Cashdvidends declared per share 210.7 1.997.4 94.4 (32.7) 2.059.1 674.4 1,384.7 09 1,3838 $ 1835 1.79 $ (238.7) 8.8 0.5 835 0.01$ 0.01$ 1.245.7 1.66 162 $ 7493 762.3 0.89 $ 7544 773.0 0.72 $ 7483 7697 0.56 $ See Notes to Consolidated Financial Statements Serdar STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Sep 29, Sep 30, 2012 1,384.7 $ Oct. 2011 1,248 0 8.8 $ (0.6) 02 47.1 (246) 0.7 (03) (422) 43 0.7 (03) (122) 4,5 Net earnings including noncontrolling interests Other comprehensive income (loss), net of tax Unrealized holding gains (losses) on available for sale securities Tax (expense) benefit Unrealized holding main(losses) on cash flow hedging instruments Tax (expense) benefit Unrealized holding gains (losses) on net investment hedging instruments Tax (expense) benefit Reclassification adjustment for met (grans losses realized in net earnings for cash flow hedges Tax expense benefit Net realized holding gains (losses) Translation adjustment Tax (expense) benefit Other comprehensive income (los) Comprehensive income (los) including noncontrolling interests Comprehensive income attributable to socontrolling interests Comprehensive income attributable to Starbucks 328 (12.1) 1.0 (0.4) (12.1) 4.5 14.8 (43) 463 (3.5) 85.6 (41.6) 03 (26.4) 16.6 (6.1) (4.4) (1.4) 09 (109) 1.2371 23 1.234.8 6.1 (33) (236) 1,3611 0.9 1,360 2 $ 443 531 5 05 526 $ See Notes to Consolidated Financial Statements STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except per share data) Sep 29, Sep 30, 2012 $ 2,575.7 $ 6581 5614 1.111.2 287.7 2773 5,4714 583 496.5 3,200.5 9670 1853 274.8 862.9 11,516.7 5 1.1886 848.4 485.9 1,2415 1965 238.7 4.199.6 1160 4599 2.6589 973 144.7 143.7 399.1 8,2192 ASSETS Current assets Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes, net Total current assets Long-term investments Equity and cost investments Property, plant and equipment, net Deferred income taxes, net Other assets Other intangible assets Goodwill TOTAL ASSETS LIABILITIES AND EQUITY Current liabilities: Accounts payable Accrued litigation charge Accrued liabilities Insurance reserves Deferred reveme Total current liabilities Long-term debt Other long term liabilities Total liabilities Shareholders' equity Common stock (50 001 par value) authorized, 1.200.0 shares; issued and outstanding. 753 2 shares and 749 3 shares (includes 3.4 common stock units). respectively Additional paid capital Retained earnings Accumulated other comprehensive income Total shareholders' equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY 398.1 491.7 $ 2.7841 1.2693 1785 653.7 5.3773 1.299.4 357.7 7,034.4 1.1338 167.7 510.2 2.2098 5496 3453 3.101.7 0.8 2821 4,1303 670 4,4802 2.1 4,4823 11 5167 $ 0.7 394 5,046.2 22.7 5 1090 55 5.114.5 8,2192 See Notes to Consolidated Financial Statements STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS for million) Sep 29, Sep 30, Oct 2 Focal Year Ended 2013 2012 2011 OPERATING ACTIVITIES 8.8 $ Net earnings including noncontrolling interests 1,384.7 $ 1.2480 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 6556 580.6 550.0 Litigation charge 2,784.1 Gain on sale of properties (302) Deferred income taxes, et (1.045.9) 61.1 1062 Income cared from equity method investees, net of distributions (562) (193) (329) Gain resulting from sale/acquisition of equity in joint ventures (80.1) (55.2) Stock-based compensation 1423 1536 145.2 Other 230 23.6 33.3 Cash provided (used) by changes in operating assets and liabilities: Accounts receivable (683) (903) (887) Inventones 152.5 (2733) (4223) Accounts payable 88.7 (1052) 2275 Accrued liabilities and insurance reserves 87.6 23.7 (81.8) Deferred revenue 139.9 60.8 35.8 Prepaid expenses, other current assets and other assets 763 (19.7) (22.5) Net cash provided by operating activities 2.9083 1,750.3 1.612.4 INVESTING ACTIVITIES: Purchase of investments (785.9) (1.748.6) (9660) Sales, maturities and calls of investments 1,0402 1,796.4 4300 Acquisitions, net of cash acquired (610.4) (129.1) (558) Additions to property, plant and equipment (1.1512) (856 2) (531.9) Proceeds from the sale of property, plant, and equipment 153 53 117.4 Proceeds from sale of equity in joint ventures 108.0 Other (272) (418) (132) Net cash used by investing activities (1.411.2) (974.0) (1.019.5) FINANCING ACTIVITIES: Proceeds from issuance of long term debt 749.7 Principal payments on long-term debt (352) (Payments) proceeds from short-term borrowings (30.8) 30.8 Purchase of no controlling interest (27.5) Proceeds from issuance of common stock 247.2 2366 250.4 Excess tax benefit on share based awards 258.1 1698 1039 Cash dividends paid (628.9) (5130) (3895) Repurchase of common stock (588.1) (519.1) (5559) Minimum tax withholdings on share-based awards (121.4) (585) (15.0) Other 10.4 (0.5) (5.2) Net cash used by financing activities (108.2) (745 5) (608.0) Effect of exchange rate changes on cash and cash equivalents (1.8) 9.7 (0.8) Net increase (decrease) in cash and cash equivalents 1,387.1 40.5 (159) CASH AND CASH EQUIVALENTS: Beginning of period 1.1886 1.148.1 1.164.0 End of period $2.575.7 $ 1.1886 $ 1.148.1 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for Interest, net of capitalized interest $ 34.4 $ 34.4 $ 344 Income taxes S 539.1 S 4169 S 350.1 See Notes to Consolidated Financial Statements 2013 Form 10-K CONSOLIDATED STATEMENTS OF EQUITY (in millions) Additional Pald in Capital 0.75 145.65 Share 742.65 Equity Accumulated Other Retained Comprehensive Shareholders No controlling Earning Income (Less) Interest 3,471.2 $ 57.25 3,674.7 S 76 5 1,245.7 1,245.7 23 (109) 1472 Total 3,682.3 1,248.0 (10.9) 1472 (109) 1472 Balans, October 2010 Nel camings Other comprehensive income foss) Stock-based compensation expense Exercise of stock options, including tax benefit of 5961 Sale of common stock, including to benefit of $0.1 Repurchase of common seck Cash divides declared Purchase of controlling interests Balanes, October 2, 2011 17.3 0.5 (15.6) 312.5 19.1 (555.9) (419.5) (28.0) 40 55 744.85 312.5 19.1 (555.9) (4195) (28.0) 43849 $ 1,383.8 (23.6) 155.2 811 III III III Ilali 312.5 19.1 (555.9) (419.5) (35.5) 4.387.3 1,384.7 (23.6) 155.2 46.3 $ (7.5) 2.4 $ 0.9 4,297.4 5 1,383.8 (23.6) 155.2 Other comprehensive income dow) Stad-based compensation pense Exercise of sted options, including to benefit of 51673 Sale of common sted, Including to benefit of 0.2 Repurchase of common sock Cash dividende deland Nocontrolling resulting from equisition Malam September 30, 2012 Netamin Other completo) 16.5 03 (123) 326.1 19.5 (501.9) 111 Tals! TII (913) (543.7) 326.1 195 (5932) (543.7) 749.3 326.1 19.5 (593.2) (543.7) 2.2 5,114,5 8.8 443 394 $ 5,046.25 22.7 5,1090 5 83 55 5 0.5 Brace of mindig a benefit of 144.1 Salem, Induling benefit of 902 144.1 144 0.3 0.1 166.7 144.1 (108) (2885) (255.6) Necrolling from die Hal September 29, 2013 366.8 204 (544.1) (668.6) 753.25 OR 282.15 4,1103 See Notes to Consolidated Financial Statements. 366.8 204 (544.1) (6686) (3.9) 4,4823 67.0 $ 4448025 0.9) 2.1 $